Proposed Changes for Public Charities in New York

A bill (S.5115/A.2118) pending in the New York legislature would make significant changes in the executive compensation rules for New York Not-For-Profit Corporations.  The stated purpose of the law is to provide clear rules that ensure executive compensation is "reasonable and not excessive."  While the changes are targeted towards executive compensation issues, the impact, if adopted, would touch on other operational issues for Not-For-Profit Corporations.

Summary of Key Points:

1. Employees of a "public charity" (as defined under the Internal Revenue Code) and relatives of the employee would be ineligible to serve as directors (with an exception for an employee serving in an ex officio capacity).
2. All Not-For-Profit Corporations that are required to obtain an audit and all Not-For-Profit Corporations with gross receipts of $250,000 or more would be required to have a board consisting of at least five directors.
3. The fixing of compensation for directors, officers and "key employees" would require action by the full board and could not be reserved to an executive committee or compensation committee.
4. The bill would prohibit the payment of compensation to directors, except reimbursement for reasonable expenses.
5. The bill would allow email notices and email consents with respect to board of directors' unanimous written consent approvals.

This bill would have a significant impact on many Not-For-Profit Corporations and would require a change in operating practices.  Directors, officers, executive directors and donors may wish to voice to the legislature their thoughts on the changes.

For more information, I can be contacted at tim@bhlawpllc.com or at (315) 701-6426.